Greece hires Deutsche, Morgan Stanley for voluntary debt buy back- source

ATHENS Wed Nov 28, 2012 12:09pm GMT

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ATHENS (Reuters) - Greece has hired Deutsche Bank and Morgan Stanley to conduct a voluntary buy back of its debt, a senior finance ministry official told Reuters on Wednesday.

Eurogroup finance ministers and the International Monetary Fund (IMF) agreed earlier this week to conduct the buy back by mid-December, as part of measures to make Greece's debt sustainable.

Private sector analysts have since raised questions over whether it would attract enough interest from bondholders to deliver the promised savings and how it would be funded.

"We hope that early next week, if possible on Monday, the Public Debt Management Agency (PDMA) will publish the invitation for the buy back," the official said on condition of anonymity.

Deutsche Bank will be the lead manager. Deutsche and Morgan Stanley will act together as deal managers, the official added.

One proposal is to lend Greece around 10 billion euros from the euro zone's rescue fund EFSF, which would allow it to buy around 30 billion euros worth of debt, cutting its outstanding obligations by around 20 billion euros.

Officials have said that the repurchase has a target cost of around 35 cents on the euro.

The Greek official, however, said that Athens has not determined yet at what price it will offer to buy back the debt from private bondholders.

A repurchase at 35 cents on the euro is seen as a golden investment opportunity for hedge funds which have bought Greek bonds at rock-bottom prices.

But this is less certain for Greek banks and pension funds, which hold combined nearly 30 billion euros of Greek debt, about half of the outstanding Greek bonds in the hands of private investors.

Concerns that the buy back would be imposed on Greek banks at a price that would be unfavourable to them led their shares to plunge since Tuesday.

(Reporting by Lefteris Papadimas, writing by Harry Papachristou; editing by Patrick Graham)

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